Author Archives: Tibor Machan

About Tibor Machan

Smuggled out of Hungary in 1953, Machan spent three years in Munich and then came to USA and became an academic philosopher after four years in US Air Force. His memoir, The Man Without a Hobby (2006) tells it all.

Private Property Rights

The first step in the destruction of capitalism must be the abolition of the right to private property. Marx and Engels were clear about this in The Communist Manifesto. And many who sympathize with this idea of a socialist political economy agree. This is one reason many such thinkers and activists are champions of land use, eminent domain and related legal measures that render even the most personal of real property subject to extensive government control.

Karl Marx and Friedrich Engels called for the abolition of private property and the capitalist free market system – it is quite ironic that without the prosperity provided by the system they loathed, they would not have had the leisure to write their diatribes, unless a feudal lord had subsidized them, which seems highly unlikely.

Who is Best Qualified to Decide how How Your Wealth Should be Used?

I have noted before that my fellow citizens and I are the best wealth redistributors one can find. We know quite well, with only rare exceptions, where the wealth we obtained should go – how we should spend or invest or save our earnings, etc.

But vast numbers of political thinkers and players disagree. They hold that our resources must be taken from us and they, not we, should be the ones who decide what to do with them. Why? Who are these folks to butt in and remove us from the driver’s seat and place themselves and their chosen few in there instead?

Spooner had the right idea. As Joseph Schumpeter remarks in Capitalism, Socialism and Democracy: “… the state has been living on a revenue which was being produced in the private sphere for private purposes and had to be deflected from these purposes by political force. The theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”

Extortion by the State

The Laffer curve is about how much imposition or other types of trouble people are willing to tolerate from their fellows. Arthur Laffer, an economics professor at the University of Southern California, is supposed to have drawn a bell shaped graph on a napkin once to show that up to the peak point of it people are likely to put up with the burden of taxation. The peak isn’t the same for everyone, but everyone does have such a peak.

Economist Arthur Laffer as a young man, next to the curve that bears his name. Laffer was an economics advisor to Ronald Reagan, who cut taxes due to his advice, which resulted in economic growth rates that had not been seen in a very long time (and haven’t been seen again since). It is worth noting that the first few years of the Reagan era were the only period in our entire lifetime when the number of government regulations actually declined (as measured by the Federal Register). During the entire rest of our time on this planet, the Leviathan State has grown inexorably. Laffer’s idea can be extended to other areas of statism.

From the Cradle to the Grave

When during the last presidential election campaign Mitt Romney suggested that some 47 percent of Americans choose to be dependent on the government, he seems to have been right. (The exact number is probably impossible to ascertain.) And at this time, the Democrats are pretty much hoping that at least that many Americans believe they are the beneficiaries of government wealth redistribution, consisting of welfare payments, subsidies, Medicare, unemployment benefits, public works, public education, etc., etc., which they will secure for them.

Democracy – but only when it goes your way!

Over the years of watching the democratic process I’ve noticed something important. People tend to reject democracy, indeed, fight it tooth and nail, when it doesn’t go their way. But when it does, well, it is the tops.

Consider the case of California’s Proposition 187. Then governor Gray Davis of California was maneuvering to essentially gut this referendum, one that won with over 60% of the votes. So let us recognize that the leader of the Democratic Party in California has no problem rejecting what the majority of the people want when he and his friends believe that the people are wrong.

Former California governor Gray Davis, a typical representative of the cronyism prevalent in the US merchant State. What eventually tripped him up wasn’t his attempt to gut prop. 187 by legal maneuvering, but his perceived poor performance during California’s energy crisis. Many of his energy advisors were the very speculators who benefited the most from the crisis. It was one affront too many. Davis was the first member of California’s ruling caste to fall prey to a recall, after 117 previous recall attempts throughout California’s history had failed, and only the 2nd politician in US history to suffer this ignominious fate. During the boom of the 1990s, Davis had greatly expanded government spending, landing California with a near $35 bn. deficit when the bust inevitably struck.

Justice Scalia on Judicial Activism

A while ago Justice Antonin Scalia criticized his fellow justices at the U. S. Supreme Court for making law, a role he believes belongs to the legislature or the people themselves. Justices, he argued, are there to interpret the US Constitution and this they must do by reading it as it was intended back when it was framed and when it was later amended. In a dissenting opinion Justice Scalia wrote,

The court says in so many words that what our people’s laws say about the issue does not, in the last analysis, matter: ‘In the end our own judgment will be brought to bear on the question of the acceptability of the death penalty….’ The court thus proclaims itself sole arbiter of our nation’s moral standards.

Do Our Rights Depend on the State?

A theme of prominent contemporary political thinking would have us believe that our rights are granted to us by government. Famous academics such as Stephen Holmes and Cass R. Sunstein have argued as much in their book,The Cost of Rights (W. W. Norton, 1999). “As they put it, “individual rights and freedoms depend fundamentally on vigorous state action” (p. 14) and “Statelessness means rightlessness” (p. 19).

Committed etatiste Cass Sunstein, formerly the “administrator of the Office of Information and Regulatory Affairs”, or what would be called the “ministry of information retrieval” in Terry Gilliam’s movie Brazil. The depths of his statolatry are truly legendary by now. For instance, in one of his papers he proposed that the government should “infiltrate, fine, tax or outright ban” the web sites of “conspiracy theorists” (=anyone harboring the slightest doubts about government-generated propaganda). The main question exercising Sunstein’s mind isn’t whether everybody should bend over, but how far they should bend over. Naturally he imagines himself as one of those giving rather than receiving orders once the State has become all-encompassing.

An Insurmountable Obstacle

Be it the gargantuan or minuscule kind, collectives face an insurmountable obstacle in their governance. There simply is no way for everyone in the collective to get proper representation.
Communitarians, for example, who are today’s version of people who believe the tribe is the most fitting group for people, always show their inability to provide all members with proper representation when their leaders and spokesmen keep using the pronoun “we” as they talk of their system and the policies they recommend for it.

A recent example of the use of term “we” as a collectivist political slogan. Who exactly is “we”?

Pragmatism Cannot Work in Practice

The title of this article appears paradoxical because ‘pragmatic’ usually means ‘practical, workable, functional’. As such, when one claims to be a pragmatist when it comes to, say, economic policy, one is likely to receive praise from those who are critical of ‘ideology’ or ‘ideological thinking’ – by which they mean ethical thinking that involves basic principles or axioms which pragmatists believe aren’t available to us in any field.

Hurting Consumers and Workers Alike

So Donald Trump wants to keep “cheap” (foreign made) goods and services from reaching Americans! But the rub is that when barriers to trade are established, such as tariffs or quotas, folks are deprived of the chance to save and then purchase items they would like to have with the savings.

Not only is this vicious but it is counterproductive. It prevents Americans from spending their funds on goods and services at home or elsewhere. And that impedes commerce no less so than a highway bandit does.

Highway robbery in progress. Here an 18th century wig-stealing gang is setting to work (gold, silver and wigs were the most popular items targeted by highwaymen. Wigs were horrendously expensive at the time and very fashionable).

Differences and Similarities

No one should attempt to treat Ayn Rand and Murray N. Rothbard as uncomplicated and rather similar defenders of the free society although they have more in common than many believe. As just one example, neither was a hawk when it comes to deploying military power abroad.* There is evidence, too, that both considered it imprudent for the US government to be entangled in international affairs, such as fighting dictators who were no threat to America. Even their lack of enthusiasm for entering WW II could be seen as quite similar.

Redistribution of Wealth

Everyone has been told that life isn’t fair and generally it is deemed unwise to insist that we all get the same breaks — good health, good looks, a pleasant region in which to live, parents who are responsible and loving, as well as well off, and the rest of what is generally hoped for by most. It is, however, also argued by some that what most of us really want isn’t happiness at all but comparable advantage, the condition to be as well off as the next person, at least. (1)

Most read in the last 20 days:

Effects of Monetary Pumping on the Real World
As long time readers know, we are looking at the economy through the lens of Austrian capital and monetary theory (see here for a backgrounder on capital theory and the production structure). In a nutshell: Monetary pumping falsifies interest rate signals by pushing gross market rates below the rate that reflects society-wide time preferences; this distorts relative prices in the economy and sets a boom into motion – which is characterized by...

“Literally On Fire”
This week brought forward more evidence that we are living in a fabricated world. The popular story-line presents a world of pure awesomeness. The common experience, however, falls grossly short.
There are many degrees of awesomeness, up to total awesomeness – which is where we are these days, in the age of total awesomeness, just a short skip away from the Nirvana era. What is Nirvana, you may wonder? We only know for sure that Nirvana is what...

A Useful Public Service
There are nooks and corners in every city where talk is cheap and scandal is honorable. The Alley, in Downtown Los Angeles, is a magical place where shrewd entrepreneurs, shameless salesmen, and downright hucksters coexist in symbiotic disharmony. Fakes, fugazis, and knock-offs galore, pack the roll-up storefronts with sparkle and shimmer.
The Alley in LA – in places such as this, consumers are as a rule well served by applying a little bit of...

Moribund Meandering
Earlier this week, the USD gold price was pushed rather unceremoniously off its perch above the $1300 level, where it had been comfortably ensconced all year after its usual seasonal rally around the turn of the year. For a while it seemed as though the $1,300 level may actually hold, but persistent US dollar strength nixed that idea. Previously many observers (too many?) expected gold to finally break out from its lengthy consolidation pattern, but evidently the...

A Movie We Have Seen Before – Repatriation Effect?
There was a sizable increase in the year-on-year growth rate of the true US money supply TMS-2 between February and March. Note that you would not notice this when looking at the official broad monetary aggregate M2, because the component of TMS-2 responsible for the jump is not included in M2. Let us begin by looking at a chart of the TMS-2 growth rate and its 12-month moving average.
The y/y growth rate of TMS-2...

Waiting for Permanent Backwardation
The price of gold dropped 9 bucks, while that of silver rose 3 cents. Readers often ask us if permanent backwardation (when gold withdraws its bid on the dollar) is still coming. We say it is certain (unless we can avert it by offering interest on gold at large scale). They ask is it imminent, and we think this is with a mixture of fear and longing for a higher gold price.
Lettuce hope this treasure is not cursed... but it probably is....

Shill Alarm
One well-known commentator this week opined about the US health care industry:
“...the system is designed the churn and burn... to push people through the clinics as quickly as possible.
The standard of care now is to prescribe some medication (usually antibiotics) and send people on their way without taking the time to conduct a comprehensive examination.”
From the annals of modern health care... [PT]
Nope. That is not the standard...

In Other Global Markets the “Turn-of-the-Month” Effect Generates Even Bigger Returns than in the US
The “turn-of-the-month” effect is one of the most fascinating stock market phenomena. It describes the fact that price gains primarily tend to occur around the turn of the month. By contrast, the rest of the time around the middle of the month is typically far less profitable for investors.
Good vs. bad seasonal timing... [PT]
The effect has been studied...

Tightening Credit Markets
Daylight extends a little further into the evening with each passing day. Moods ease. Contentment rises. These are some of the many delights the northern hemisphere has to offer this time of year. As summer approaches, and dispositions loosen, something less amiable is happening. Credit markets are tightening. The yield on the 10-Year Treasury note has exceeded 3.12 percent.
A change in pace: yields are actually going somewhere. There is...

Voting with their Feet
A couple of recent articles have once more made the case, at least implicitly, for political decentralization as the only viable path which will begin to solve the seemingly insurmountable political, economic, and social crises which the Western world now faces.
Fracture lines – tax and regulatory competition allows people to “vote with their feet” - and they certainly do. [PT]
In the last few months, over 3,000 millionaires have...

Gold Lending and Arbitrage
There was no rise in the purchasing power of gold this week. The price of gold fell $22, and that of silver $0.19. One question that comes up is why is the fundamental price so far above the market price? Starting in January, the fundamental price began to move up sharply, and the move sustained through the end of April.
1-month LIBOR (London Interbank Offered Rate – the rate at which banks lend euro-dollars to each other). LIBOR and GOFO...

A Truism that is Demonstrably True
Most people are probably aware of the adage “sell in May and go away”. This popular seasonal Wall Street truism implies that the market's performance is far worse in the six summer months than in the six winter months. Numerous studies have been undertaken in this context particularly with respect to US stock markets, and they confirm that the stock market on average exhibits relative weakness in the summer.
Look at the part we...